Commercial Lease Agreements: It’s All In The Details
So, you’re ready to find a location (or a new location) for your medical practice and call it home. If you choose to lease, you will likely have the pleasure of negotiating a commercial lease agreement with the landlord. Before you set sail on that adventure, here are a few pointers to keep in mind.
If the lease is for a term of more than one year, section 689.01 of Florida Statute requires the commercial lease to be executed in the presence of two witnesses. Without two witnesses signing on the lease agreement, the lease may be considered void and unenforceable. If your practice is incorporated, section 692.01 of Florida Statutes allows the corporation to execute a binding lease agreement without the attestation of two witnesses as long as it is executed by the president, any vice president, or chief executive officer and the corporate seal is affixed. No corporate resolution is needed to evidence the authority of the person executing the lease.
After the lease agreement has been executed, the landlord has an implied duty to give to the tenant possession of the leased premises in accordance with the terms of the lease. Most leases contain a specific rent commencement date and a specific delivery date. During the term of the lease agreement, the tenant has full rights of possession, dominion, and use of the leased premises, in the absence of a statute or contractual provision limiting those rights.
Commercial leases come with a covenant of quiet enjoyment. Whether implied or expressed, this covenant of quiet enjoyment is an assurance to the tenant that the landlord’s title is not defective. The covenant also prevents the landlord from disturbing the tenant’s possessory rights. This covenant provides the basis for the tenant’s right peaceful enjoyment of the premises. However, you should be cognizant that this covenant of quiet enjoyment can be expressly waived or limited by provisions in the lease agreement. Although a court would not be wrong to give effect to both the express and the implied covenants, you should be mindful of the landlord’s attempt to eliminate or severely limit the tenant’s rights and remedies under this covenant. For example, a landlord may attempt to impose conditions precedent to enforcement of the covenant.
The covenant of quiet enjoyment is vital to protect and preserve your practice. If a landlord authorizes acts that cause substantial injury to the tenant in the peaceful enjoyment of the demised premises, which is the natural and probable consequence of the acts so authorized, the landlord is liable therefor. For instance, the landlord is liable to the tenant for substantial injury to the peaceful enjoyment of the demised premises that results from the landlord’s remodeling of portions of the building other than those occupied by the tenant.
Synonymous with the covenant of quiet enjoyment is the landlord’s liability for constructive eviction. A constructive eviction may occur when the landlord commits any wrongful act, default, or neglect that render the leased premises unsafe, unfit, or unsuitable for occupancy in whole or in substantial part for the purposes for which they were leased.
With respect to repair and maintenance of the leased premises, section 83.201 of Florida Statutes provides some guidance with respect to a commercial tenant’s right to withhold rent. When the lease affirmatively and expressly places upon the landlord the obligation for repair and maintenance, but is silent on the procedure to be followed to effect repair or maintenance and the payment of rent relating thereto, and the landlord has failed or refused to perform the repair or maintenance resulting in the leased premises becoming wholly untenantable, the tenant may withhold rent. The tenant must serve upon the landlord a written notice: (a) declaring the premises to be wholly untenantable, (b) giving the landlord at least 20 days to make the specifically described repair or maintenance, and (c) stating that the tenant will withhold the rent for the next rental period and thereafter until the repair or maintenance has been performed.
The lease may provide for a longer period of time for repair or maintenance. Once the landlord has completed the repair or maintenance, the tenant must pay to the landlord all of the rent that was withheld. If the landlord fails to complete the repair or maintenance in the allotted time, the parties may extend the time by written agreement or the tenant may abandon the premises, retain the rent withheld, terminate the lease, and avoid any liability for future rent or charges under the lease agreement.
Focusing on the details surrounding the commencement of the lease and your rights and remedies for preventing the interruption of your practice will help you to maintain a viable and prosperous practice.